MEPs call on Mario Draghi to consider helicopter money

Eighteen members of the European Parliament have signed an open letter to the Head of the European Central Bank, emphasizing the need to consider “helicopter money” — a proposal to distribute money directly to people as a citizens’ dividend.

Some advocates argue that a basic income should be financed by “helicopter money” — the printing of new money by central banks for direct distribution to individuals. To be sure, the policy is contested, even among basic income supporters. Many suggest redistributive policies to fund a basic income, as opposed to the creation of new money, and some have vocally opposed helicopter money. Continue reading “MEPs call on Mario Draghi to consider helicopter money”

Helicopter money or European Unconditional Citizens Income?

Somewhere in March 2015, the European Central Bank (ECB) launched its long-awaited programme of quantitative easing (or QE), adding lots of public debt to the private kind it has already been buying. Its monthly purchases will rise from around €13 billion ($14 billion) to €60 billion until at least September 2016. The ECB is just the latest central bank to jump on board the QE bandwagon. Most rich-economy central bankers began printing money to buy assets during the Great Recession, and a few, like the Bank of Japan, are still at it. But what exactly is quantitative easing, and how is it supposed to work? Continue reading “Helicopter money or European Unconditional Citizens Income?”

Can helicopter money kick start the Eurozone?

With Eurozone growth still sluggish, should the European Central Bank (ECB) consider a radical option – like helicopter money?

ING senior economist Teunis Brosens explains, in this eZonomics video, that the ECB has already employed quantitative easing[1] and lowered interest rates below zero. But how effective these measures will be is unclear, he says.

Continue reading “Can helicopter money kick start the Eurozone?”

What is helicopter money?

Helicopter money is a reference to an idea made popular by the American economist Milton Friedman in 1969.

In the now famous paper “The Optimum Quantity of Money”, Friedman included the following parable:

Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.”

The basic principle is that if a central bank wants to raise inflation and output in an economy that is running substantially below potential, one of the most effective tools would be simply to give everyone direct money transfers. In theory, people would see this as a permanent one-off expansion of the amount of money in circulation and would then start to spend more freely, increasing broader economic activity and pushing inflation back up to the central bank’s target. Continue reading “What is helicopter money?”